Slew of new measures take effect on Jan 1

SINGAPORE: A slew of new measures kick in on Tuesday. Among them are parents getting better support in raising a child and employers abiding by a weekly day-off policy for foreign maids. Car buyers and taxi users too will benefit from new regulations.

The Child Development Account under the Baby Bonus scheme is aimed at helping families with the costs of raising children. It is a savings account where parents' deposits are matched dollar-for-dollar by the government, up to a cap ranging from S$6,000 to S$18,000, depending on the birth order of the child.

From January, parents can continue to dip into the savings account until their children are 12 years old, instead of six. This includes paying for healthcare and childcare fees.

Associate Professor Paulin Straughan, a sociologist with the National university of Singapore (NUS), said the move is pertinent, given the demands of raising a child.

She added: "A big concern for parents now is childcare. And childcare for school-going primary kids, primary school kids are not cheap. For example, after school care. So if they are allowed to dip into the CDA for this, it will certainly help working dual-income families significantly."

The new year also marks the start of mandatory weekly rest-days for foreign domestic workers. This will apply to those whose work permits are issued or renewed from January 1, 2013. All maids will be covered by the new legislation by 2015.

Employers and workers should agree on which day of the week the rest day falls, and if there's no day-off, employers must give monetary compensation.

Employment agencies are also expected to play a larger role.

President of the Association of Employment Agencies, K Jayaprema, said: "The employers are going to need the employment agencies to be part of this, because we are supposed to negotiate the off-days, we are supposed to witness the paperwork, when the domestic worker actually agrees not to take her day off and to be compensated.

"So I will strongly encourage employers to ensure that when they are going through this process of off-days with the employees, they should work with the employment agencies involved."

Separately, those eyeing a new car can stand to benefit from the new Carbon Emissions-Based Vehicle Scheme. Owners of cars which are more fuel-efficient and emit less carbon will enjoy rebates of up to S$20,000. This will be given as an offset against the vehicle's Additional Registration Fee.

To make an informed choice, buyers are advised to look out for the mandatory Fuel Economy Labelling Scheme (FELS) at showrooms.

The Land Transport Authority said only cars that are approved by LTA under FELS can be registered for use from January 1.

Those who do not own a car may also now find it easier to get a cab. That is because operators must ensure that 70 per cent of their fleet are on the road during peak hours and clock an average daily mileage of 250 kilometres. This translates to around eight to nine hours on the road per day, five days a week.

Observers believe the move may burden smaller operators and cause them to merge, in order to meet the standards.

Associate Professor Lee Der-Horng of the Department of Civil Engineering at NUS said: "With this quality of service measurement, this may become a burden to the smaller operators. Because given their size and given their corporate resources, it may be even more difficult for them to satisfy (the requirements).

"Perhaps we may see a merger between the smaller operators but from the passengers side, this may be good news as well. After the merger, they may better cooperate resources and they may be able to provide better service to passengers."

Taxis will be also allowed to pick up and drop off passengers along roads within the Central Business District, except for roads with bus lanes during the operating hours of the lanes.

Singapore's economy grows 1.1% on-year for Q4 2012

SINGAPORE: Singapore's economy performed better than expected in the fourth quarter despite talks of a technical recession.

The economy grew by 1.8 per cent, an upturn from the contraction of 6.3 per cent in the preceding quarter. It also grew at a modest pace of 1.1 per cent on a year-on-year basis in the fourth quarter of 2012, an improvement from the flat growth in the previous quarter.

For the whole of 2012, the economy is estimated to have grown by 1.2 per cent. This is slightly lower than MTI's growth forecast of around 1.5 per cent, as weakness in the manufacturing sector continued to weigh down on the economy.

On a quarter-on-quarter basis, the manufacturing sector contracted by an annualised rate of 10.8 per cent, extending the 9.9 per cent decline in the previous quarter. This largely reflected the continued weakness in the output of the electronics cluster.

On a year-on-year basis, the sector contracted by 1.5 per cent in the fourth quarter, following the 1.6 per cent decline in the preceding quarter.

The construction sector grew by 5.9 per cent on-year, moderating from the 7.7 per cent growth in the preceding quarter.

Singapore's economy grew 1.8% in Q4, dodged recession

SINGAPORE - Singapore's economy grew 1.8 per cent in the fourth quarter from the preceding three months at an annualised rate and after seasonal adjustments, defying expectations it would go into recession.

Manufacturing was the worst-performing sector in the trade-dependent Southeast Asian city-state, shrinking 10.8 per cent at a quarter-on-quarter annualised and seasonally adjusted rate.

But services provided some positive news, rising 7.0 per cent quarter-on-quarter.

From a year earlier, economic growth was 1.1 per cent in the fourth quarter and 1.2 per cent for the whole year, below the government's forecast of around 1.5 per cent for 2012 and far weaker than the 4.9 per cent expansion in 2011.

Key points:

Singapore, whose trade is around three times its gross domestic product, last had a recession in 2009.

The median estimate of economists polled by Reuters was for a quarter-on-quarter contraction of 0.9 per cent and year-on-year growth of 0.9 per cent.

 

Commentary: 

Michael Wan, Economist at Credit Suisse:

"The Q4 numbers were a surprise partly because of what the prime minister said. We thought there would be a technical recession."

"However, services also brought the Q4 growth up in spite of the weakness in manufacturing. Manufacturing was also not as weak as industrial production numbers implied. This contributed to the upward surprise."

"For 2013, we still expect growth to be weak at 2 per cent. We expect employment growth will start to moderate this year. It was stronger than expected last year, with companies hoarding labour in anticipation of tighter foreign labour rules."

"We also expect more companies to relocate and shift out of Singapore."

Selena Ling, Head of Treasury research at OCBC:

"We escaped recession by the skin of our teeth because Q2 and Q3 numbers were revised lower."

"Manufacturing still looks weak as seen from the double-digit decline (quarter-on-quarter and annualised). Near term, it's hard to see any improvement in manufacturing."

"On the positive side, there is a rebound in momentum. Hopefully, services can provide the lift ... A recovery may come earlier than expected because the Q2 numbers have been revised down, providing a lower base."

Joey Chew, Economist at Barclays:

"It's a pleasant surprise we managed to avoid a recession. The whole reason is because the first two quarters were revised lower."

"Manufacturing has contracted for three quarters in a row now, which is expected given industrial production numbers. Services grew a little better than expected. Perhaps some of the financial or tourism related industries did rebound from Q3."

"We expect Singapore to grow 2.1 per cent in 2013. Even though we had originally expected Singapore to go into recession in Q4, we thought it would have been short lived."

"There will be weak growth in Q1 but a more sustainable recovery from Q2 onwards. Q1 will still be precarious for the US economy, there's still uncertainties surrounding the fiscal cliff situation, debt ceiling etc. There will be some tightening that will affect households and corporates."

Market reaction:
The Singapore dollar was trading around 1.2217 to the US dollar compared with 1.2213 before the data.

Background
 

- In a revision, the economy shrank 6.3 per cent in the third quarter from April-June at a seasonally adjusted and annualised rate. The previously announced number was a 5.9 per cent contraction.

- Singapore has been badly hit by weakness in Western economies that has crimped demand for many of its exports.

- The city-state's electronic manufacturers have also failed to tap surging demand for smart phones, unlike rivals such as South Korea and Taiwan. For the first 11 months of 2012, electronics production fell 11.1 per cent compared with the same period of 2011, underscoring the weakness in export markets.

US Senate's 'fiscal cliff' bill adds $4.8 trillion to deficits -CBO

WASHINGTON - The Congressional Budget Office on Tuesday said Senate-passed legislation to avert the "fiscal cliff" would add nearly US$4 trillion (S$4.8 trillion) to federal deficits over a decade, largely because it would extend low tax rates for almost all Americans.

The congressional scorekeeper's analysis was released as a number of Republicans in the House of Representatives voiced opposition to the bill, and considered amending it with deeper spending cuts.

House Majority Leader Eric Cantor and others complained the bill's spending cuts would do little to curb trillion-dollar deficits.

Senate-passed plan extends decade-old Bush-era tax rates for individuals earning up to US$400,000 and couples earning up to US$450,000 - nearly 99 per cent of US taxpayers.

But the non-partisan CBO compared the Senate plan's revenue and expenditure changes to laws that are currently in force, which call for US$600 billion in tax hikes and automatic spending cuts in 2013 alone - effectively a dive off the fiscal cliff.

With Congress feverishly working to avoid the fiscal cliff in recent weeks, many Washington policymakers had viewed the current-law budget "baseline" as unlikely to be maintained.

Compared to an alternative CBO scenario in which Congress extends all expiring tax provisions and turns off automatic spending cuts slated to start taking effect this week, the Senate plan achieves minimal deficit reduction in the early years.

Over 10 years, deficits under the Senate plan would be US$3.75 trillion less than permanently extending all of the tax and spending policies in the alternative scenario. That is largely because the CBO expects that remaining on an unsustainable fiscal path would severely constrict economic growth later in the decade, holding back revenue growth and keeping outlays higher.

Fiscal 2013 Effects 

By going over the fiscal cliff, the CBO had previously forecast that the higher taxes and lower spending would slash the fiscal 2013 US budget deficit by more than half, to US$641 billion from US$1.1 trillion the prior year.

But in its analysis of the Senate-passed plan, the CBO said fiscal 2013 revenues would be US$280 billion lower and spending US$50 billion higher, resulting in a US$330 billion deficit increase, for a total deficit of around US$971 billion.

Under the CBO's keep-taxes-unchanged scenario, the deficit would be US$1.04 trillion for fiscal 2013.

None of the CBO's analyses takes into consideration possible future spending cuts and reforms to federal health care and retirement programs that Congress might make in a new budget battle emerging around mid-February over the next increase in the US debt limit.

Euro up against dollar on US fiscal cliff deal

SINGAPORE - The euro surged against the dollar on Wednesday as traders flocked to the riskier single currency with the US Congress poised to endorse a deal to avert the "fiscal cliff" budget crisis.

The euro strengthened to US$1.3262 (S$1.62) in morning Asian trade from US$1.3192 on Monday.

The euro was at 115.28 yen (S$1.62) from 114.45 yen. The dollar rose to 86.95 yen from 86.69 yen.

The fiscal cliff deal was spurring traders to shift their investments from the safe-haven greenback to riskier currencies, said Jason Hughes, head of premium client management for IG Markets Singapore.

The deal passed the Senate on Tuesday but its fate hung in the balance for hours as House conservatives sought to amend it to include big spending cuts, which would likely have killed its chance of passage.

The House of Representatives was due to vote late Tuesday Washington time.

Had the deal splintered, all Americans would have been hit by tax increases and the spending cuts would have kicked in across the government, in a combined US$500 billion shock that could have rocked the fragile recovery.

"We saw risk currencies react positively to the fact that a deal has gone through the Senate and is likely to find its way through the House," Hughes told AFP.

"Despite the development in the US that should be US dollar positive, it actually lends support to the risk currencies at the moment," he added.

Pay increment, bonus for 2013 expected to dip: report

SINGAPORE: Global consulting firm Hay Group has predicted cautious pay rises for Singaporean workers as 2012 comes to a close.

In its latest report, the group said pay increases and bonuses for next year are expected to slide.

Hay Group said salary increases averaged 4.6 per cent this year - slightly higher than the 4.4 per cent in 2011. But pay increases for next year are expected to dip 0.2 percentage points back to 4.4 per cent.

The Singapore Human Resources Institute agreed, saying increments will hover around 4 per cent.

The Institute expects the manufacturing, construction and logistics sectors to face a tighter squeeze.

The Institute's executive director, David Ang, said: "For those company who are not doing well, and it's sort of breaking even.

"I think the important thing is to inform the workers on the prospect of their business and at the same time collectively bite the bullets to hope for better times to come."

As for bonuses, the actual average variable bonus this year is said to be 2.6 months. For next year, it is expected to dip slightly to 2.5 months.

The Hay Group said hiring seems to have picked up in Singapore, despite the continuing uncertainty in the global economy.

Fifty-eight per cent of those surveyed said they are planning to increase staffing levels, compared to 50 per cent this time, last year.

But economist Dr Tan Khay Boon from SIM Global Education said this does not mean firms will splurge on hiring.

Dr Tan said: "The company want to meet the demand for the customers and therefore they need more workers to help them out in the operations. But, they are also very careful about the bottom-line.

"That's why they prefer to hire the worker at the same cost or better still, at the lower cost instead of expanding the cost to get the workers."

Leading the hiring outlook in the survey are the engineering (33 per cent), sales (29 per cent) and financial (21 per cent) sectors.

Turning to the region, the Hay group said high-growth Asian economies like China, Vietnam, Indonesia and the Philippines can expect significant pay rises in 2013.

The survey, conducted in September, covered over 500 Singapore-based companies from both the private and public sectors.

They were polled on their business sentiments and salary and bonus projections for the next 12 months.

US stocks edge up amid hopes for 'cliff' deal

NEW YORK: US stocks ended slightly higher Monday amid hopes that a political deal over the looming fiscal cliff was in the works.

Markets showed little effect from the fresh turmoil in the eurozone, after Italian Prime Minister Mario Monti said he would resign in the coming days and Silvio Berlusconi threatened a comeback on an anti-austerity platform.

The Dow Jones Industrial Average rose 14.75 points (0.11 percent) to 13,169.88.

The broad-market S&P 500 added 0.48 (0.03 percent) to 1,418.55, while the tech-rich Nasdaq Composite rose 8.92 points (0.30 percent) to 2,986.96.

Trade was light and in a narrow range, with transportation, technology and basic materials shares strongest, while consumer goods slipped.

Troubled Hewlett-Packard surged 2.6 percent on rumors that raider Carl Icahn was moving on the company.

Canadian energy firm Nexen added 13.8 percent after Canadian regulators approved its takeover by Chinese state oil giant CNOOC late Friday.

Excepting Apple (-0.6 percent), big tech stocks were higher: Facebook 1.3 percent, Google 0.2 percent, Cisco 2.4 percent and STMicroelectronics, which said it was leaving a joint venture with Ericsson, added 3.4 percent.

Bond prices edged higher. The 10-year US Treasury yield slipped to 1.62 percent from 1.63 percent late Friday, while the 30-year fell to 2.80 percent from 2.81 percent.

Bond prices and yields move inversely.